Twenty Years of ‘New Economic Policies’: Impact on Development

July 1, 2012

By Anirban Kar

1: Introduction

This article addresses the highly charged and yet unresolved debate: how the series of drastic policy changes since early nineties, often called the “economic reforms” has affected development in India. Such changes have certainly coincided with substantial GDP growth but evidences on development are, at best, mixed. While the ruling establishment claims substantial achievement in development owing to these policy changes [1], critics, particularly those with left leanings, have disagreed.

Before we start, we need to fix a couple of definitions. If not otherwise mentioned, ‘growth’ will mean ‘growth of per capita income’, whereas ‘development’ will mean ‘general well-being of the poorer sections of the society’. Admittedly, the latter definition is not precise. There is no single yardstick to evaluate wellbeing and thus we shall use multiple indicators, like income, employment, health and education to capture ‘development’. We use the words ‘economic reform’, ‘liberalization’ and ‘new economic policies’ interchangeably.

To this end, a direct approach would be to compare development indicators from the pre-reform period with the post-reform period. Evidences here are ambiguous. For instance, it is not clear whether the rate of decline in ‘incidence of poverty’ (that is, number of ‘poor’ people) has slowed down after the economic reform. Comparisons of such indicators across time points suffer from several problems. First, we need to find development indicators, which are time invariant. For example, it would be flawed to take ‘nutrition intake’ as a development indicator because ‘nutritional requirement’ of our body may itself change over time as a result of development – improvement or decline in general health, increase or decrease in working hours, nature of employment etc. Second, to compare across time, we must convert data to a common reference frame. However, construction of a common reference frame may be problematic. For example, to compare income over time we need to control for inflation. Unfortunately, computation of price indices and hence computation of inflation suffers from serious flaws. These problems are particularly severe if we compare development indicators over a long period.

In this article, I take an alternative route. Instead of comparing pre and post reform period, I compare some development indicators in the post-reform period across the states. Since late-eighties, per capita income of the major states started to diverge – a group of states experienced rapid income growth compared to the the rest. This, then, offers us an opportunity to test the effect of such “reform”-induced growth on development. If this kind of growth indeed stimulates development then we should expect more rapid development in ‘high-growth’ states than the rest.

However, we find no evidence to support this hypothesis. Briefly, here are our main findings:

i.With a few notable exceptions development indicators show improvement across all states in both pre-reform and post-reform periods. So, to evaluate the effect of reform and growth we should check whether or not high-growth states developed more rapidly than the rest during the post-reform period.
ii.While some states are doing much better than others in terms of improvement in development indicators those doing better are not necessarily the high-growth states. Similarly those states, which are performing poorly in terms of development indicators, are not necessarily the low-growth states.

Let us note a couple of points before we present our analysis. First, this article is not about ‘inequality’ – which has increased beyond any doubt in the last twenty years. An increase in inequality only tells us that the gap between the rich and the poor has widened – it does not necessarily imply that well-being of the poor has suffered due to liberalization. Second, our approach does not eliminate all measurement issues about which we mentioned above. However, state wise comparison allows us to keep the time interval shorter, which moderates some of the inconsistencies.

2: State wise average income and growth

Starting from late eighties and particularly after 1990 major states of India began to grow at a staggeringly unequal pace. While there was always interregional disparity in economic performance, it increased sharply in the last two decades. We shall exploit this emerging trend to check whether or not higher growth can be equated with higher level of development.

Just as ‘per capita real GDP’ (gross domestic product) roughly indicates the average income of a country, ‘per capita real NSDP’ (net state domestic product) roughly measure the average income of a state. Graph 1 shows change in per capita real NSDP of major Indian states between 1980 and 2008 [2].

Graph 1: Per capita Net State Domestic Product at factor cost (constant price) of major Indian states between 1980 and 2008


Data Source: RBI Handbook of statistics on the Indian economy

Graph 1 reveals divergent fortune for the states. We can group the states roughly into two categories: high-income states: Andhra Pradesh, Gujarat, Haryana, Karnataka, Kerala, Maharashtra, Punjab, Tamil Nadu and low-income states: Assam, Bihar, Jharkhand, Madhya Pradesh, Chhattisgarh, Orissa, Rajasthan, Uttar Pradesh, West Bengal [3]. Even in 1980, high-income states were doing better than the rest in terms of average income – their average income was 1.5 times that of the low-income states. However, since then this disparity has increased consistently. High-income states, on average, now, earn twice that of low-income states.

Instead of the level of income, if we look at the income growth, that is how fast average income has changed over this period, we find the same pattern. Table 1 looks at the ratio of per capita NSDP in 2008 to per capita NSDP in 1980. It roughly captures how fast a state is growing.

Table 1: Ratio of per capita NSDP in 2008 to per capita NSDP in 1980


In general, high-income states have grown faster than the low-income states, with a few notable exceptions – four low income states, Jharkhand, Chhattisgarh, Rajasthan and Orissa [5], have grown as fast as the high-income states.

3: Varying exposure of different states to economic liberalization

As mentioned in the introduction, our aim is to exploit this divergence between states to test whether or not high-income-high-growth states are also developing faster than the rest. But before we proceed to the main section of our analysis, let us ask: Why some states grew faster than the others? What role did liberalization play in this process [6]? Were the high-income states more ‘reform-friendly’ than the ‘low-income’ states?

It is hard to answer these questions without a rigorous analysis. But lets’ see what the establishment claims; here is a quote from the Deputy Chairman of the Planning Commission and one of the main architects of economic reform Montek Singh Ahluwalia [7]. “These states (high growth states such as Gujarat and Maharashtra – added by the author) clearly benefited the most in the postreform period…their superior performance must be attributed primarily to the ability of these two states (talking about Gujarat and Maharashtra – added by the author) to provide an environment most conducive to benefiting from the new policies. Their experience, together with the experience of the other strong performers, should provide the basis for identifying the critical ingredients of success in accelerating growth, which should be emulated by others.” There could be some truth in Ahluwalia’s claim – the states, which grew faster, perhaps, were more exposed to economic reforms than the rest. Following are some indications, but these should not be taken as conclusive evidence.

One major hallmark of the new economic policies was the emphasis on export-led growth. In 2008, the Indian government spent Rs 44,417 Crore on export promotion (this is simply a subsidy to the exporters), which was about the same amount the government spent on PDS (public distribution system) [8] that year. On the top of central government subsidies the states have competed with each other to provide special benefits, such as tax exemption, cheap land, interest free loans etc. to export oriented industries. SEZ’s were set up to promote export where even national labour laws are not applicable. Thus, number of SEZ and export oriented units can be used as an indicator for exposure to neo-liberal policies.

Similarly Foreign Direct Investment (FDI) in the states captures the destination of foreign capital in India. Aspects of Indian Economy, 44-46, notes that, after economic reform “India has seen a flood of capital inflows through various channels and under various labels – foreign institutional investment (FII) in the share market, foreign direct investment (FDI) (especially in the form of ‘private equity’, which behaves much like FII capital), and external commercial borrowings by Indian firms”. Equity flow alone has grown twelve times in the last five years. Table 2 looks at the state wise decomposition of SEZ, export oriented units and FDI in India. It confirms that high-income states were relatively more exposed to neo-liberal policies than the low-income states.

To sum up this section, the establishment believes, perhaps with some justification, that greater exposure to new economic policies rocketed some states to the trajectory of high growth. It also seems to believe that reform induced growth has brought development to the working mass. Thus Mr. Ahluwalia advises low-income states to follow the trail of Gujarat, Maharashtra and other high-income states to growth and the glory, “…poverty reduction in the major states requires rapid growth of GSDP (gross state domestic product, another index of average income – added by the author), capable of generating a broad based expansion in employment and income levels”. In the next section, we will test, how successful high-income states have been, so far, to achieve these developmental goals.

4: Stagnating Development

Let us repeat our hypothesis once more: If reform led growth has indeed induced development then we should expect more rapid development in the high-growth states compared to that in the low-income states. A similar difference should also be observed between the high-growth low-income states and the low-growth low-income states.

We shall use indicators, such as income, employment, educational and health achievement to assess the magnitude of development. To avoid repetition, I shall only refer to the comparison between the high and low-income states. Similar results holds for the comparison between high and low-growth states, which the reader can check himself/herself from the Tables and Diagrams.

4.1: Income

Increase in average income in itself is not an indictor of development. Since income is unequally distributed we need to check specifically for the poor. It could well be the case that the rich become richer, poor become poorer and yet the average increases. The following graph charts per capita real consumption of different strata of the society between 1987 and 2002. Since collecting income data is difficult [9], per capita real consumption (per head expenditure, adjusted for inflation) is used as a proxy for income. Graph 2 tracks the poorest 40 percent, middle 40 percent and richest 20 percent of rural and urban population separately. Notice that the urban richest 20 percent is the only big gainer. Urban middle 40 percent and rural richest 20 percent have gained moderately. But the income of the remaining three groups, rural middle class, both urban and rural poor, have almost stagnated.

Graph 2


Source: ‘Inequality in India: A survey of recent trends’ by Parthapratim Pal and Jayati Ghosh

However this is the aggregate national picture. It could still be the case that poor in high-income states are doing better than the poor in low-income states. The following graphs look at the poorest 20 percent rural household (Graph 3) and the next 20 percent (Graph 4) rural household state by state. It records the change in monthly per capita expenditure (MPCE), a proxy for real income, between 2005 and 2010. Notice that there is hardly any difference between the high-income and the low-income states. For the poorest 20 percent of rural household the situation is extremely grim. No big states other than Kerala show substantial gain in MPCE. Minor gain has been registered by low-income states such as Assam and UP and high-income states such as Tamil Nadu. High-income states Haryana, Karnataka, Punjab, Gujarat and Maharashtra show stagnation and even decline in MPCE, just like low-income states Bihar, MP and Orissa. For the second poorest 20 percent, once again, only two big states, namely Kerala and Tamil Nadu show substantial increase in MPCE. All other states, irrespective of their income group record a minor (below 5%) increase. Punjab, a high- income state and Rajasthan, a fast growing low-income state, in fact show a decline in MPCE.

Graph 3


Graph 4


What about poverty figures? Since, poverty estimations are fraught with contentious issues [10] and are often underestimated (the government and the corporate lobbies are keen to beat down the poverty figures to limit subsidy to the poor), in this article we use an alternative indicator. We look at how earnings of certain occupations, which are known to be at the bottom of income ladder, have changed in the post-reform period across low-income and high-income states.

It is well known that as far as rural employments are concerned, agricultural labour (landless labourer) and self-employed in agriculture (small farmer, share cropper) are among the poorest. Among all ‘officially poor’ households in rural areas in 2004-05, 41.8% were agricultural labourers while 26.7% were self-employed in agriculture [11]. These two groups also cover about 65% of rural population. To check how the earning of rural poor is changing, we compute the average expenditure (as a proxy for income) of agricultural labourers and self-employed in agriculture for all states for the years 2000 and 2005. To make the numbers comparable (called average real expenditure) across time and state, we adjust the expenditure figures by price indices [12]. The following table (Table 4) provides the growth rate in average real expenditure of agricultural labourers and self-employed state by state between 2000 and 2005.

Table 4: Growth in average real expenditure of agricultural labourers and self-employed in agriculture, between 2000 and 2005


Majority of states show a negative growth that is decline in expenditure for agricultural labourers. Self-employed in agricultural are slightly better off but still many states register decline in their expenditure. If we compare high-income and low-income states there is no difference at all. Only four states, of which two are low-income states (Assam, West Bengal) and two are high-income (Andhra Pradesh, Kerala), registered a substantial expenditure growth for agricultural labourers. Along with these four states, MP (low-income), Tamil Nadu, Punjab and Maharashtra (high-income) show expenditure growth for self-employed in agriculture. Moreover, loss in expenditure (and hence in income) for agricultural labourers/self-employed is smaller in the low-income states compared to the high-income states. Table 4, captures the economic distress in agriculture during the post-reform period and it appears that the distress is even more acute in the high-income states. It should not come to us as a surprise; we know that high-income states such as Karnataka, Maharashtra and Andhra Pradesh have been the hotbed of farmers’ suicide during the past decade.

To check how the earnings of urban poor are changing across states, we compute the average real expenditure of casual urban workers in 2000 and 2005. Casual workers are among the poorest of urban workers and constitute about 15 percent of urban workforce. I do not consider the urban self-employed, the largest section of urban workforce (more than 40%), because it is extremely diverse. A vendor and a lawyer, both would be categorized as self-employed and thus self-employed, as a group, is not representative of the urban poor. Table 5 shows the statewise growth rate in average real expenditure for urban casual labourers between 2000 and 2005. Real expenditure of the urban casual labourers has declined in all high-income states except Andhra Pradesh and Kerala whereas only two low-income states Assam and Rajasthan have registered a decline.

Table 5: Growth in average real expenditure of urban casual labourers between 2000 and 2005


Table 4 and Table 5 together show that the increase in average national income hide the true picture of despair. Real incomes of the rural and urban casual workers have declined across states and most of them are actually the high-income states rather than the low-income states.

4.2: Employment

Economic reforms promised that market-friendly policies would bring employment. We were told that it is important to give subsidies to the rich corporates rather than the poor farmers (on export than on fertilizer) because corporate investment is going to create new jobs. Did this promise materialize? Have the high-income states created more employment than the low-income states?

If we compare the national level figures, job growth seems to have stagnated, in fact, declined in the last few years, both in urban and rural areas.

Table 6: Employment growth rate in rural and urban areas from 1983 to 2010


Employment growth in different sectors in the economy also reveals the abysmal employment situation. Basu and Das (Sanhati, 2012) notes that Indian growth was led primarily by the service sector, while manufacturing and agriculture remained stagnated. However employment growth has shrunk across all sectors, including some service sector activities such as Finance and business. Only exceptions were service sectors such as construction and trade and to smaller extent mining. While service sector jobs are accessible to highly educated upper strata alone, construction and mining sector jobs are known to be notoriously exploitative [13]. Thus economic reforms, in general, have failed to bring remunerative employment to the working class.

Table 7: Employment growth rate in different sectors from 1980 to 2005


Let us now look at the second question – have high-income states created more jobs than the low-income states? Table 8 shows the employment growth rate of the states between 1993 and 2005.

Table 8: Employment growth across high and low income states between 1993 and 2005xiv


Once again there is hardly any difference – if anything low-income states on average have created more jobs than the high-income states. Haryana has the best record in employment creation and Tamil Nadu the worst. Note that both of them are high-income states.

Table 8 provides the rural-urban composite employment growth rate for the states. Since agriculture has stagnated after nineties, employment in agriculture is often considered as compulsion rather than choice. One may argue that the high-income states have created more non-agricultural jobs than the low-income states. Table 9 looks at the urban employment growth between 1999 and 2005 separately. The pattern is exactly the same as overall employment. There is no systematic difference between the high-income and the low-income states. This exposes the neoliberal claim that investment and growth creates new job opportunities. It appears to be a false propaganda that only facilitates corporate profiteering.

Table 9: Urban employment growth across low and high income states between 1999-2005


4.3: Health and Education

At the national level, India lags behind the developing world when it comes to human development indices. For instance, in 2004, 20 percent of the Indian population was malnourished. The corresponding figures for Nepal and Nigeria were 17 and 9 respectively. In 2005, only 54% children could join secondary education in India as compared to 73 in Thailand and 87 in Egypt [15] . In this section we will investigate whether the high-income states have been able to improve the well-being of their people following the adoption/exposure to new economic policies. We shall compare health and education achievements across the high and low-income states. Specifically, we shall use the following indicators.

Health indicators

  • Infant Mortality Rate (IMR): Measures the chance of dying before one year of age
  • Malnourished Children (MC): Percentage of underweight children below the age of three
  • Malnourished Women (MW): Percentage of women with body-mass index below a critical level

Education indicators

  • Gross enrollment ratio (GER) from class 9 to 12: Percentage of 14 to 18 years old who are still at school and have completed class 8
  • State wise percentage of class 5 students who managed to read class 2 text
  • State wise percentage of class 5 students who could do division.

Table 10 shows annual percentage decline in infant mortality rate from 1997 to 2002. A positive number represents decline in the Infant Mortality rate, hence an improvement in health. Similarly percentage decline in malnourished children and women are computed between 1998 and 2006. In each case a positive number shows an improvement in health indicator.

Table 10: Changes in health indicators across high and low income states after 1996


Low-income states, on average, are actually performing slightly well in IMR and MC, while high-income states are well ahead in MW. But even in MW, there are significant variations within each group. Haryana and Punjab are performing as poorly as the low-income states while Jharkhand, Orissa and West Bengal among the low-income states are performing as well as high-income states. Thus there is absolutely no evidence that higher average income would result in higher health indices.

We shall see that a similar feature holds for education indicators as well. Enrollment at primary level is almost universal across the states and there is not much variation. However that does not ensure basic learning and the dropout rate is extremely high. Thus we consider gross enrollment ratio (GER) from class 9 to 12. We compute the growth in GER between 2005 and 2008. In this period, on average, high-income states have increased GER from 49.2 to 54.7 percent, while the low-income states have grown from 31.1 to 35.5 percent. The percentage point change is almost the same in two groups; high-income states doing slightly better. But once again there is huge variation within each group and it cannot be said that the performance of high-income states are uniformly superior (see Table 11). Madhya Pradesh, Uttar Pradesh, West Bengal and Rajasthan have improved at least as much as the best performing high-income states like Tamil Nadu, Kerala, Haryana and Karnataka. On the other hand GER remained stagnated (or declined) in Punjab and Maharashtra just like low-income states Assam, Chhattisgarh and Orissa.

Table 11: Change in Gross Enrollment Rate (GER) for class 9-12 across low and high income states between 2005 and 2008


We mentioned earlier that although primary school enrollment is almost universal yet it does not ensure basic education. The following maps show the pitiable condition of education across the states in rural areas. There are two maps – the left one shows state wise percentage of class 5 students who managed to read class 2 text and the second shows state wise percentage of class 5 students who could do division. Those states, where below 50 percent students could perform a task, are painted in dark shade. It is evident that there is no difference between high-income states and low-income states. High-income states Tamil Nadu, Gujarat and Karnataka are poor performers in both the tasks, while low-income states like Madhya Pradesh, Chhattisgarh and Bihar are among the better performers. These maps are from 2009 but the pattern has remained the same over years.

Graph 5: State wise percentage of class 5 students who managed to read class 2 text (left panel) and those who could do division (right panel)


Data source: Annual Status of Education Report (Rural) 2010, facilitated by PRATHAM

5: Why development has stagnated?

In Section 4, we observed that as far as improvements in development indicators are concerned there is hardly any difference between high-income and low-income states. Based on this analysis, we can draw the following conclusions:

i.Higher per capita income and higher growth rate in high-income states did not improve the living condition of the poor more than what had been achieved by the low-income states.

ii.Economic reform promised that the benefit of growth would ‘trickle down’ and eventually reach the poor. Had that been the case then the poor of high-income states would have received higher benefit of the growth compared to the poor in low-income states. However our development indicators do not support that conjecture.

iii.We also reject the linear relation between reform and development. Those who are arguing for further reform (FDI in multi brand retail, National Investment and Manufacturing Zone – the newest avatar of SEZ, contract farming etc.) in the name of development are deceiving the poor – their assertion is not based on the facts.

While we can reject the neo-liberal claim of ‘inclusive growth’, we still need to explain what choked development. It demands an elaborate reply, which is beyond the scope of this article [16]. I shall only point out a few important factors:

i.Among other policies, economic reforms prescribe export led growth. That means economic activities are geared to meet the demand of external market rather than the internal market. Since purchasing power of internal market is not of primary concern, economic reforms support export-oriented activities instead of activities that can expand the home market. As a result we see stagnation in agriculture, which shares 55% of national employment, and a boom in service sector, which employs below 30%.

ii.However service sector boom benefitted a small group of highly skilled workers and created a narrow domestic market with high purchasing power.

iii.Economic reforms insist on gradual withdrawal of state from public investment. Economic activities become dependent on private capital. At the beginning of economic reform, private capital was limited and concentrated at the hand of a small section of the society. This capital-rich section along with foreign capital gained control over the Indian economy.

iv.Naturally capital was invested in the sectors, which bring quick and high return. Thus investment flowed into sectors like export, mining, and real estate etc., which either caters to foreign markets or the affluent Indians. Monopoly over capital and lack of competition also ensured high return for a long period.

v.With decline in agriculture, the rural rich landlord class also diversified their economic activities and got integrated with the global capital. However, through their newly acquired economic activities (like trade, sub contracting) and capture of welfare program (such as PDS, NREGA) they kept their land and rural power base largely intact even within the changed scenario.

vi.For its reproduction and expansion, capital has to exploit natural resources and labour power. In the name of attracting investment the Govt. offered resources such as natural resources and capital (interest free loan, divestment of PSU) to the big corporations at a pittance, while stagnated development ensured a continuous flow of cheap labour. Bargaining power of labourers was also kept under check through violence perpetrated jointly by the state machinery and localized power.

vii.When the aggregate size of national income expands, it is always theoretically possible to redistribute a portion of the income to the working class. However economic reform also demanded withdrawal of state support because it adversely affects the capital. Gradual elimination of redistributive measures and capture of welfare programs (as mentioned in point vi) have aggravated the development stagnation.

6: Limitations and agenda for farther study

The analysis presented in this article should be considered as a preliminary study. Evidences suggest that beneath the euphoria of ‘miracle growth’ lies a deep-rooted problem of stagnated development in India. However, the evidences at this stage are not conclusive and require farther study. A more rigorous and complete analysis will be taken up in the future. Here I point out some of the limitations of this article.

i.Some development indicator data, I have used, are for a short span. It can be argued that such short spans are not representative of the entire post-reform period. Since, most of the comparisons here are compiled from various secondary sources, I also could not maintain a uniform comparison period. A rigorous study will use mid eighties to 2010 as the comparison period for all development indicators.

ii.I have only used stylized statistical figures to test my hypothesis. However, this can be only indicative, a rigorous analysis shall use formal statistical tests before reaching any conclusion.

iii.This article indicates (but does not claim or prove) that perhaps, states, which were exposed more to policy reforms, grew faster than the others. However there are also contrary evidences, Ha-Joon Chang’s ‘Kicking Away the Ladder: Development Strategy in Historical Perspective’, argues that adoption of liberal and neoliberal policies actually stifle growth. What caused economic growth in India, particularly its spatial disparity, is an important question and should be studied separately. This can also help us understand why such growth had failed to trigger development.

iv.The article also implies that low reform does not mean high development. To understand improvement in development perhaps factors other than reform should be examined. Studying socio-political institutions that can ensure development, true democracy and beyond is an essential political task but it was beyond the scope of the present article.

v.This article is silent on why some states were more open to economic reforms than the others? I believe a lot can be learned about production relation in India by properly exploring this question. Several factors could be responsible for openness to economic reforms, such as (i) geographic – proximity to big cities and major trade routes (ii) socio-poilitical – caste and nature of kinship ties (iii) grassroots resistance movement – for instance in West Bengal and Chhattisgarh. However, my conjecture is that the key difference between states is to be found in the nature of ruling classes. States where local elites exerted their control over labour through their control over land were initially less open to economic reforms (for instance Bihar, Orissa). In contrast, states where local elites had already diversified from land and maintained their control over labour through alternative means, such as monopoly over trade, found it easier to integrate with big capital and were more open to economic reforms (for instance Maharashtra, Gujarat). Anyway, this issue is as thorny as some others mentioned above and we leave it for future research.

Related articles for farther reading:

1. Angus Deaton and Jean Dreze; Food and Nutrition in India: Facts and Interpretations, EPW, 14th February 2009
2. Anirudh Krishna ET. Al.; Why Growth is not Enough: Household Poverty Dynamics in Northeast Gujarat, Journal of Development Studies, 2012
3. Ashok Kotwal, Bharat Ramaswami and Wilima Wadhwa; Economic Liberalization and Indian Economic Growth: What’s the evidence? Journal of Economic Literature, 2011
4. Deepankar Basu and Debarshi Das; Economic Growth in India: A Sectoral Account, Sanhati, March 15, 2012
5. John Harriss; ‘Inclusive Growth’: How is India Doing? ISAS Working Paper No. 137, 2011
6. K. V. Ramaswamy; Growth and Employment in India: The Regional Dimension, ISAS Working Paper No. 22, 2007
7. Montek S. Ahluwalia; State-Level Performance under Economic Reforms in India’, EPW, 6th May 2000
8. Parthapratim Pal and Jayati Ghosh; Inequality in India: A survey of Recent Trends’, DESA Working Paper No. 45, 2007
9. Surjit Bhalla and Tirthatanmoy Das; Pre- and Postreform India: A Revised Look at Employment Wages and Inequality, India Policy Forum, Vol. 2, 2005


1. ‘Pre- and Postreform India: A Revised Look at Employment, Wages, and Inequality’ by Bhalla and Das

2. State income data have been taken from RBI, which took it from CSO. The data seem to suffer from some comparability problem. However researchers and academics have used this data widely.

3. Jharkhand and Chhattisgarh came into existence in 2000. If not otherwise mentioned, data attributed to these states prior to 2000, are those of undivided Bihar and MP

4. Note that Punjab has grown slowly than all high-income states and even slower than a few low-income states primarily due to stagnation in agriculture; see ‘Deceleration of Economic Growth in Punjab’ by Singh and Singh, EPW.

5. Although income growth of Chhattisgarh and Orissa are lower than high-income states over the entire period, these two states have the fastest average income growth rate (among all major Indian states) since 2000.

6. For a survey, see ‘Economic Liberalization and Indian Economic Growth: What’s the evidence?’ by Ashok Kotwal, Bharat Ramaswami and Wilima Wadhwa

7. See, ‘State-Level Performance under Economic Reforms in India’ by Montek S. Ahluwalia

8. This data is collected from the document “Revenue foregone under the Central Tax System: Budget 2009”

9. To avoid income tax the rich may not divulge the true income. The problem is less severe for the poor. See ‘Crying Wolf – Are We Over-counting the Number of Poor People in India?’,Sanhati.

10. See, ‘Food and Nutrition in India: Facts and Interpretations’ by Deaton and Dreze in EPW.

11. See, ‘Inclusive Growth’: How is India Doing?’ by John Harriss

12. We use CPI-Al that is consumer price index for agricultural labourers

13. See, PUDR report ‘In the Name of National Pride: Blatant Violation of Workers Rights at the Commonwealth Games site’.

14. We don’t have employment growth figure for Assam, Jharkhand and Chhattisgarh

15. These comparisons are collected from World Development Indicators, 2007

16. For a case study on Gujarat, see ‘Why Growth is not Enough: Household Poverty Dynamics in Northeast Gujarat’ by India Anirudh Krishna, Mahesh Kapila, Mahendra Porwal, and Virpal Singh

[A preliminary, rough sketch of this article was presented at a meeting organised by Perspectives. I would like to thank Alita Nandy, Anindya Bhattacharya, Debarshi Das and Deepankar Basu for their comments on an earlier draft]


3 Responses to “Twenty Years of ‘New Economic Policies’: Impact on Development”

  1. keta meera sahebu Says:
    August 31st, 2012 at 01:51

    Dear sir,

    You are fully aware of this quotation of MK Gandhi “My idea of Village Swaraj is that it is a complete republic, independent of its neighbors for its vital Wants, and yet interdependent for many others in which dependence is a necessity…..The government of the village will be conducted by the Panchayat of five persons, annually elected by the adult villagers, male and female , possessing minimum prescribed qualifications… this panchayat will be the legislature, judiciary and executive combined to operate for its year of office”

    “The soul of India lives in its villages”, declared M. K. Gandhi

    Mahatma Gandhi dreamt of a village that stands on its own and takes all its decision for its development.

    After Gandhi Nehru thought of implementing this idea. He thought and thought finally he adopted some ideas from capitalism and some ideas from communism, called it as Socialism. We are following this from the day we got independence . As on to day we made many great strides on technological front. We are on top five or six countries from technology point of view .

    But then Our progress in Economic Front remained dismal.

    According to the 2011 Census, 68.84% of Indians or say 833.1 million people live in 640,867 different villages. The size of these villages varies considerably. 236,004 Indian villages have a population less than 500, while 3,976 villages have a population of 10,000+.

    • An estimated 400 million people – more than the population of the United States
    live on less than $1 a day.
    • India also had 828 million people below $2 a day.
    • On this scale Sub-Saharan Africa, the world’s poorest region, is better than India
    • It is surprising , One third of worlds poor live in India.
    • In India today we have 65% population on farms
    • Most of their life is miserable .
    • More than 17,500 farmers a year killed themselves between 2002 and 2006,
    • At least 160,000 farmers have committed suicide since 1997
    • There are only 33 million tax payers in India

    If we think of these statistics we will be convinced, “ It is time for all of us to work for a new India free from all these vagaries”.

    “Change India” should be our new slogan

    To change India Dreams are not enough. We need workable solutions. Throughout the world search is going on for new models.

    There were 32 noble laureates who wrote on , “ how to scale new peaks in economy”. But then they provide incremental benefits under capitalism.
    No more than that!

    The search ends here with the formulation of a new economic theory , Which I call “The Reverse Principle”

    The model itself is simple
    It is the fusion of three concepts!

    It keeps within itself the spirit of co-operative effort: All to work ! All to produce ! All to share
    It keeps the spirit of capitalism: Self sustaining ! Self growing ! Self regeneration !
    It uses the concept of post dated cheque

    The fusion releases economic nuclear power and changes the very life style of every one
    This revolution may make a beginning in India soon!
    Under Reverse Principle it is possible to realize ”The Self Reliant villages of Mahatma Gandhi.”

    While proposing the implementation method we have considered efficiency, present technology and existing institutions for easy implementation

    Several books are written on this theme

    Institute of parliamentary Affairs published 10 articles and 10 theme based adds on this concept

    More on these topics can be seen in webs
    1. for philosophical issues
    2. for economic and political ideas

    We have finalized 10 CDs to explain these ideas of new economic model in which one of them is “Self Reliant Villages of Mahatma Gandhi’

    CD1. Introducing the Basics of new economic model
    CD2. Towards Total Transformation
    CD3. Our Road to New life Styles
    CD4. Our journey to New Life Styles
    CD5. Self Reliant Villages of Mahatma Gandhi
    CD6. Corruption gets Routed out
    CD7. New Heights in our Life Styles
    CD8..The Greatest of all Plans
    CD9.. Transforming the World Economy
    CD10. New Economic Model for New Age

    These theories have not come out just like that

    I have a dream of India in the year 1965. In 35 years I have developed philosophy of the Unified Vision .

    About 100 articles and several books are brought out on these concepts.

    From 2000 to 2004 I have brought out, “India in My Dreams , Vision 2015”.

    Since then 7 years have passed. During this period I have worked out every detail of this model to the level of bolts and nuts

    The Power point presentation , “It is not a Dream “ brings out the effort that is gone in preparing these theories.

    I have kept most of these power point presentations on top of the home page of

    It takes just one hour to read the basics in these power point presentations .
    After going through these basics one can read selected topics for more clarity.
    All your doubts will be cleared.

    Anna Hazare did some work on this. But it is an example . We may found some more such efforts here and there in isolated manner . But then in India we have 640,867 different villages .

    We have to implement this program in every village . That is where the real challenge lies . By using the Reverse principle we can do this !

    It is time for all Gandhians to make , “The dream of Gandhi ‘ a reality in India.

    I will be too happy to give a presentation on this idea .
    I look forward to here from you !

    With warm personnel regards


  2. Syed Abdullah Says:
    February 3rd, 2013 at 23:50

    Hello Sir/Madam,
    Now in India where numbers of political bodies are corrupted and Indian Politics are more effected on us voting dates comes near and now a days all political peoples wants more power to make they own rules and which is offence to the Indian policies and against normal man.

    Everyone us know that India is Democratic country, but Indian politics are not Democratic but they are Democratic only on the family not for a common man who start they daily life with the dreams but Indian politics only made to break they dreams


    My message to Indian Politics Follow the rights as a normal man and make it democratic country, see the countries like “America” who built they own power in the world, see the “United Kindom” who make they own Luxury for them self but they are many just google it.


    I showed a reel life but change it to a real life and make it successful India in business and providing more and more jobs to the unemployed
    rule like legend and be like a legend and make one rule not many groups like BJP, JANTHADAL, CONGRESS and OTHERS. Be one and Rule one its leads and dont fight for making own government…

  3. Ramani Says:
    March 5th, 2013 at 05:45

    dear scholar, it was nice to see such a valuable one in the net. if you could understand the class character of the ruling class in india, it would be more easy understand the paradigm shifts in the policies, which are all to suit the capitalist-landlord coalition which is in adhoc collaboration with the foregn finance capital.

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